ECB flags inflation risk as Europe’s energy crisis deepens

Europe is staring down its most acute energy emergency since 2022, with crude oil climbing past $100 a barrel and natural gas breaching levels not seen in more than three years, squeezing household budgets and stoking fears of a painful winter across the continent.

The benchmark Dutch TTF natural gas price surpassed €80 per megawatt-hour on September 10, a high not recorded since late 2022. Brent crude has surged above $100, posting an roughly 8 percent weekly gain by the end of last week amid tight supply. The rally has been driven by war-related damage to energy infrastructure in Persian Gulf countries, disrupted shipments through the Strait of Hormuz, and European gas storage levels sitting well below seasonal norms — at roughly 67 percent, according to Greek energy reporting.tovima+3

Pain at the Pump and in the Power Grid

The price surge is hitting consumers from Athens to Nicosia to Skopje. In Greece, unleaded gasoline has climbed to an average of €2.12 per liter, while diesel averages €2.077, with island prefectures such as the Cyclades paying even more. Electricity prices have followed: the Greek day-ahead market price reached €186.76 per megawatt-hour, one of the highest readings in the past 12 months.tovima

In Cyprus, fuel prices are approaching the records set during the 2022 crisis. Gasoline is selling for as much as €1.718 per liter and diesel at €1.989, narrowing the gap with the July 2022 peaks of €1.886 and €2.053 respectively, according to Ekathimerini. The Cypriot cabinet last week extended its fuel excise-tax reduction through November 30, saving motorists about 8.3 cents per liter.ekathimerini+2

North Macedonia on Sunday announced it would cut fuel VAT from 18 percent to 10 percent from September 15 through September 28, the latest in a series of temporary reductions the government has imposed this year to cushion consumers. Italy, which imports virtually all of the gas and oil it consumes, remains among the EU countries most exposed to fossil fuel shocks.presstv+1

Winter Warnings and Policy Scrambles

With Greece's heating-oil season set to open on October 15, officials warn prices could start at €1.80 per liter — roughly 60 percent above last year's opening price of €1.13. The Greek government is weighing an extension of its €0.15-per-liter diesel subsidy, a cut to the special consumption tax on heating oil, and an increase in the heating allowance for low-income households, with decisions expected by late September.tovima

The European Central Bank is watching the energy shock closely. ECB policymaker Peter Kazimir said Monday that eurozone inflation "could turn out higher than already elevated projections," calling the surge in natural gas and power costs a key concern, according to Reuters. The ECB raised its key interest rate by 25 basis points on September 10, and swap markets are pricing in further tightening.wtvbam+2

Meanwhile, a European Court of Auditors report released last week found that the EU's plan to wean itself off Russian energy is faltering, with only €54.3 billion of the €300 billion earmarked under REPowerEU actually allocated, even as a ban on Russian LNG imports looms at year-end. Against that backdrop, Metlen chief executive Evangelos Mytilineos has urged Brussels to continue purchasing Russian energy, arguing that forthcoming import bans will deepen the winter crisis, The Times reported.reuters+2